Is There a Trade and Defense Perimeter? The Regional Impacts of Trade and Defense Spending in the United States, 1978-1986

Using an expanded shift share technique to impute international trade-related industrial job change, the extent to which structural changes in trade and defense spending appear to explain state economic performance differentials is explored. The findings show there is limited support for the “trade perimeter” argument, but strong support for the hypothesized relationship between military procurement spending and state trade performance. To the extent that defense commitments, especially to private sector procurement and R & D, have operated as an informal industrial policy, particularly by guaranteeing strong domestic sales, they have enabled a significant number of states peripheral to the traditional industrial heartland to build a strong international trade posture. The conclusion offers observations on the economic development implications of these findings.